Humber/Ontario Real Estate Course 4 Exam Practice

If Property X is smaller than other homes on the same street, how is its value likely influenced?

1. Property X will decrease in value due to demand.

2. Property X will have no impact from surrounding homes.

3. Property X will increase in value due to the principle of progression.

4. Property X's value is determined solely by its internal features.

5. Property X will match the lowest value home in the area.

6. Property X will face regression due to larger neighboring properties.

The correct answer is: Property X will increase in value due to the principle of progression.

The correct answer relates to the principle of progression, which suggests that the value of a property can be positively influenced by the value of surrounding properties. In a neighborhood where most homes are larger and potentially more valuable, Property X, despite being smaller, may see its value increase. This is because buyers often consider the location and the average values of comparable homes in their decision-making process. Thus, the presence of larger, higher-valued homes nearby can lift the perceived value of Property X, making it more attractive to potential buyers who recognize the benefits of living in a desirable neighborhood. In contrast, the options reflecting a decrease in value due to demand or a home matching the lowest value in the area do not account for the positive influence that a higher surrounding market can have. Moreover, the idea that Property X's value is solely determined by internal features ignores the broader market dynamics at play, such as neighborhood influences. Lastly, the notion of regression is a contrasting concept, which states that a property’s value may decrease in relation to more valuable neighboring homes, and is not applicable to this scenario where Property X can benefit from proximity to larger properties.